New Homes Make Buy-to-Let Simple
Added: (Tue Jul 15 2008)
Pressbox (Press Release) -
With rising rental prices and increasing demand, the future looks bright for people considering a buy-to-let investment.
The latest survey by the Royal Institute of Chartered Surveyors (RICS)* reveals that rents are rising at their fastest pace since surveys began in 1998. The report indicates that demand for rental properties is also buoyant as people increasingly put off getting on the property ladder until later in life.
However, amongst the financial considerations of arranging a mortgage, researching the local rental market and trying to predict the potential capital gain, many forget to consider the day-to-day time and additional expense involved in becoming a landlord.
For investors who want to make buy-to-let simple, new build homes can offer an ideal solution.
Jo McGarvey, regional sales manager for Morris Homes - one of the country's largest privately-owned house builders - explains:
"Normally buying a new home is an emotional decision, but if you're looking for a buy-to-let property you should listen to your head and not your heart," says Jo.
"One of the risks faced when using a second hand home for a buy-to-let, is the potential for hidden costs. If the boiler breaks down for example, or you find that the house needs rewiring, you can be faced with an unexpected bill for thousands that may reduce your return or even push you into the red.
"However, with a new build home - as long as you're buying from a reputable house builder - all appliances will be new and covered by the manufacturer's warranty. The building work itself is also covered for the next ten years under the NHBC (National House Building Council) scheme.
"With no maintenance costs, the only additional expense for the foreseeable future will be the day-to-day upkeep of the property which can be planned and accounted for in advance, considerably reducing the financial risks of buy-to-let."
With location being a vital factor for renting successfully, new build properties can also offer other advantages.
"When house builders look at potential sites, they assess the likely level of demand - looking at factors such as transport links and the quality of nearby schools - and build the type of properties that will most appeal to the local market," continues Jo. "By letting out a new build property it is highly likely that you will have a ready made market to tap into and that the property itself will appeal to your target audience."
One such development is Hatton Point in Corby, Northamptonshire, which is an ideal location for families, couples and young professionals. Morris currently has mix of new homes available, carefully designed to offer a choice of flexible living space and adaptable to a range of buyers.
To help people considering a buy-to-let investment, Morris has put together the following advice:
- Before buying your new home spend a lot of time researching the location and who your potential tenants are likely to be. Morris sales advisors will be able to help with the basic information you require on local transport links, shops and leisure facilities and the profile of people who have been interested in the development. They can also advise you on the potential rental income that each type of property can be expected to generate.
- Sounding out local lettings agents will also help to provide an insight into the market and what return you can expect. You can also find out the cost of using their services to help market and manage the property to potential tenants. The Association of Residential Lettings Agents can provide details of reputable agents in your area.
- There are many company's offering buy-to-let mortgages (sometimes called Residential Investment Loans). Most lenders will want to know how you propose to generate rental income, so go prepared with your research and planned strategy.
- Get good financial advice before taking out your buy-to-let mortgage. Consider how you would meet your mortgage payments if the property was temporarily empty in-between lettings, how you would cope if the increase in property values was less than expected or interest rates increased and what impact this investment might have on your ability to get another mortgage if you decided to move house at a later date.
- You may have heard about the need to gain a landlord's license, however this is only relevant if you are renting out a single property to more than one tenant, couple or family group. Check whether this applies to you at www.communities.gov.uk/housing
- Make sure you understand your potential tax liability, both for any rental income (which is subject to income tax) and the money you make on the eventual resale of your property (which is subject to capital gains tax). Your local tax office will be able to tell you the current rules that apply and what allowances you will be eligible for.
To find out more about buying a new-build home, or about Hatton Point, call Morris' sales office which is open Thursday to Monday between 10.30am and 5.30pm, on 01536 742424 or visit www.morrishomes.co.uk/hatton-point/ .
*RICS Lettings Survey September 2007 Submitted by:Jane Cragg Find out more.